Interview - For UBS, size is key to opening digital wealth vaults

ZURICH (Reuters) - UBS, the world’s largest wealth manager, is convinced its new online private bank needs to get bigger. Now it needs to work out how.

FILE PHOTO: The logo of Swiss bank UBS is seen at a branch office in Basel, Switzerland March 29, 2017. Picture taken on March 29, 2017. REUTERS/Arnd Wiegmann

The Swiss bank began piloting SmartWealth last year in Britain as a platform to rival start-ups such as WealthFront in the United States and British venture Nutmeg.

Juerg Zeltner, the head of UBS’s wealth management division, told Reuters on Wednesday he was “very happy with the offering” but that scale was crucial for the model to be a success.

“This is a big learning ... the real question is how do you scale it to more?” Zeltner said.

Digital wealth managers are dwarfed by established banks like UBS, which manages more than $2 trillion (1.49 trillion pounds) in client assets.

But their lower-cost model of building an investment portfolio based on a client’s risk appetite is seen as a possible threat to private banking’s traditional advisory model.

“RISK APPETITE”

UBS SmartWealth targets clients whose wealth starts in the tens of thousands of dollars, whereas the assets of traditional private banking clients can stretch to more than $1 billion.

So far UBS, which has not said where it will roll the product out next, has seen a lag before clients start using the platform to make investments, Zeltner said.

One avenue for UBS to scale up SmartWealth is the bank’s One Wealth Management Platform, on which Zeltner expects more than 85 percent of its assets will be by the end of the year.

These are part of efforts to improve performance at its main wealth management division, which was the source of almost half the bank’s pre-tax income last year but has been hampered by negative interest rates in Switzerland and the euro zone.